Metro Detroit stands near the top of housing markets in the country primed for a price reduction, according to research from a pair of Florida academics.

Detroit and its suburbs trail just the sprawling Atlanta metro region in terms of where current buyers are paying a “premium” for homes when compared with historical averages, according to the research from the Beracha and Johnson Housing Market Ranking. The two professors — Eli Beracha and Ken H. Johnson, from Florida International University and Florida Atlantic University, respectively — aim to “provide information that will allow for more informed real estate decision making.”

Using data from the Zillow Home Value Index, the researchers show that as of April 30, buyers in the metro Detroit region — as defined by the U.S. Census Bureau as including Wayne, Oakland, Macomb, Lapeer, Livingston and St. Clair counties — were paying an average of $252,395 for a house or condo compared to an “expected” price of $179,282, representing a roughly 41% premium. Those in the Atlanta metro region pay the same premium, while Cape Coral, Fla., comes in third with prices 37.6% higher than historical norms, per the data presented by the professors.

Johnson cautioned he’s not expecting any sort of overall crash in prices, but does expect that the average price paid by buyers will likely flatline or start to come down and become more in line with historical norms.

The last time metro Detroit buyers paid a discount relative to the historical averages was late 2017, based on the data included in the research.

“I’m worried about the metro Detroit market because it shouldn’t be going up, especially this rapidly,” Johnson told Crain’s. “Detroit is going up faster now than at any time in the past 30 years in terms of property appreciation values … and price. That’s a little unnerving.”

That Southeast Michigan home prices are on the upswing comes as little surprise to anyone even slightly familiar with the local market.

For three consecutive months around the end of last year, metro Detroit led the nation in home price growth, as tracked by the monthly S&P CoreLogic Case-Shiller Indices. While the region has since lost the top spot, the pace of increase in the region continues to outpace the national figure.

While certainly welcome news for sellers, metro Detroit remains near the bottom of the index in terms of overall appreciation, meaning that homes in the region are worth less than most other major metro areas of the country.

Still, Johnson cautioned that just because Southeast Michigan homes are more affordable than most other metro regions, that doesn’t mean there are no issues with the price of homes here.

“Affordability might not mean price stability,” Johnson said, adding that the rapid increase in home prices coupled with the region’s stagnant population might make for a negative outcome in the future.

Local Realtors say the findings of the research come as little surprise.

Andrea Carollo, an agent in the Birmingham office of Max Broock Realtors, shared as a recent example of a home in Royal Oak where she was representing buyers who made an offer $20,000 over asking price and her clients were also willing to cover any gaps in the appraisal, acknowledging that they would have to pay when the property under-appraised.

“All of my listings are going for more than what they could appraise for, and the buyers acknowledge that,” Carollo said, adding that the dearth of inventory means hungry buyers have few options to choose from and will go the extra mile to get an offer accepted.

To Carollo’s point, bidding wars have become more common in Southeast Michigan’s housing market in recent months.

The Realtor agreed with the conclusions of Johnson: Some form of correction is likely in the future, but when that might happen remains unknown.

“Whenever you have something that has gone so crazy in any direction, it’s bound to settle,” Carollo said. “I think … right now, everybody agrees that the values are overvalued.”

The research by Johnson and Beracha also speaks to a long-running debate over whether it’s more cost-effective to rent or own. In metro Detroit, at present, renting would seem to be the better option, based on the research.

As of April, renters in the region — where average rent is just more than $1,400 per month — were paying just a 2% premium over historical norms, according to the research.

The key, however, is to ensure that renters are investing that savings in assets that generate wealth down the road.

“It’s such a close call between renting and reinvesting or homeownership and building equity in a home in terms of wealth creation that there isn’t a single call to only rent or only buy,” Beracha, director of the Hollo School of Real Estate at FIU, said in a statement. “While renting and reinvesting seems to be the wisest choice, homeownership is a close second at this point.  However, renting and not reinvesting is wealth destroying and should never be considered as an option.”